Secretary Ross's Remarks at the Majority Whip Meeting, U.S. House of Representatives

Jul162018

AS PREPARED FOR DELIVERY
Monday, July 16, 2018

Thank you, Mr. Whip, for that kind introduction. And thank you for inviting me to be here with you this morning. I know there are questions about our trade policy, so let me say a few words about our intentions, and then I look forward to answering your questions.

We initiated a Section 232 Investigation under the Trade Expansion Act of 1962 to determine if it was essential for U.S. national security that we have commercially viable steel and aluminum industries required to supply our military. We found that the United States would not have the ability to defend itself if these industries disappeared under the burden of unfair trade and excess global capacity.

Prior to the imposition of 232 tariffs in March of this year, both the aluminum and steel industries were on the verge of collapsing in the next recession.

Last year, the U.S. steel industry produced 82 million tons of steel. That is one-tenth the amount of steel as China, at 832 million tons; and less than half as much steel as produced by the EU, at 168 million tons. The United States produced 23 million fewer tons of steel than Japan; and 20 million tons less than India.

Over the past 15 years, the U.S. aluminum industry has been decimated. The U.S. aluminum industry is down to three remaining companies that operate smelters, and there were only five operating smelters left in the United States at the end of 2017, down from 23 in 2000. U.S. aluminum production last year was only 740,000 tons, or 12.3 percent of U.S. consumption of almost 6 million tons. The United States imported 90 percent of its aluminum last year.

China’s production of aluminum last year was nearly 33 million tons. That is an incredible 44 times more than the United States.

The Section 232 tariffs are working. Just over a month ago, members of the Committee on Pipe and Tube Imports provided me with a list of 20 investments in new, re-opened, or expanded production capacity as a result of the tariffs.

Since the initiation of the Section 232 tariffs, there have been 11 announcements of major investments in U.S. steel and aluminum production. Two U.S. aluminum smelters are re-opening new lines, one in Hawesville, Kentucky, owned by Century Aluminum; and another in New Madrid, Missouri, owned by Magnitude 7 Metals.

This past June, U.S. Steel restarted its Granite City “B” blast furnace; and it also announced in June that it will restart its Granite City “A” blast furnace. Combined, these two lines will put 800 people back to work, and produce 2.5 million tons of essential metals that we need not only for the U.S. military but for electrical transmission systems, and our basic infrastructure.

Other major investments in steel include plants in:

  • Lorain, Ohio (Republic Steel);
  • Georgetown, South Carolina (Liberty Steel);
  • Durant, Oklahoma (Commercial Metals Co.);
  • Steubenville, Ohio (JSW Steel Ltd.)
  • Frostproof, Florida (Nucor);
  • and Brownsville, Texas (Big River Steel).

These investments would not have happened without the Section 232 tariffs. This is all good news.

Since the 232 tariffs were put in place, the U.S. Treasury has collected $1.05 billion in 232 tariffs on steel, and $328 million in 232 tariffs on aluminum, for a total of $1.33 billion in federal revenue.

Every week, we receive new exclusion requests and new objections, but the latest week of exclusion requests was the lowest since April 16. As of Monday, July 9, we have received 26,403 steel and aluminum exclusion requests, of which 3,385 were rejected for improper submission.

That leaves 23,018, of which 5,272 are in the 30-day mandatory public comment period. Of the 17,746 remaining, 9,100 are in the period of analysis by the Bureau of Industry and Security and its interagency partners. Therefore, there are only 8,513 that are pending and have not been reviewed.

Recently, we have assigned additional personnel to speed up initial review of exclusion requests and streamlined the internal process to accelerate posting of decisions for requests that did not elicit any objections. We have consolidated the domestic availability analysis done by the International Trade Administration, with work done previously by BIS.

Thus far, 133 decisions have been posted. On steel, 42 were approved and 75 denied. On aluminum, one was approved and 15 denied. With our now expanded staff in place analyzing these requests, we expect to start rolling out decisions every day.

You may recall that House Appropriators reprogrammed only $1 million of Commerce Department funding to hire additional staff to process the exclusion requests. That was a fraction of the $5 million that we requested. The Senate approved $3.3 million and the House approved $1 million; so we received $1 million. We asked to reprogram the funds on April 2nd, and received approval from the House on May 23rd. With less money and delays in receiving even that amount, we obviously are not able to process requests as rapidly as we would like.

I recognize that retaliation is a very important topic.

We believe that if the WTO upholds our 232s, the retaliatory tariffs collected by all countries would have to be repaid to the American companies.

Two weeks ago, the U.S. Trade Representative announced the formal initiation of the process for imposing tariffs on $200 billion more of Chinese exports to the United States. The Chinese earlier announced that they would retaliate if the President applied these additional tariffs. The problem the Chinese have is that this amount alone exceeds all of our exports to China, which are less than $150 billion. It means they will run out of U.S. exports on which to apply reciprocal tariffs.

Therefore, they will have to figure something else out, or only partially retaliate. They might attack U.S. companies operating in China, but that would cause layoffs in China.

The most conciliatory move on their part would be just to tariff all of the remaining U.S. exports of $150 billion, which, unfortunately, means that all $20 billion of our agricultural exports would be hit.

There are also real signs that China is finding it difficult to fully implement their existing retaliation.

Brazil previously supplied 55 percent of China’s soybean imports, while we supplied about one-third of their import demand. To replace us entirely, Brazil would have to increase its soybean exports to China by 60 percent. But if they could export that much more to China, then they already would be doing so.

China is now having to subsidize farmers to switch from corn and other products to soybeans, but that just opens up another crop for imports. Chinese farmers have very small acreage. They are inefficient and find soybeans to be an unattractive crop, as was reported last week in the New York Times. Similarly, China might pay Brazil a premium price so that they would divert their soybean exports from other markets. That, of course, would open those markets to U.S. exporters.

The new U.S. tariffs proposed on $200 billion of Chinese imports will not go into effect for at least 60 days, and presumably that would be when China would retaliate.

Somewhat happier news comes from Mexico. The newly elected President and his trade team have announced that they want to renegotiate NAFTA, and they are prepared to begin prior to the presidential inauguration day scheduled for December 1. If that is the case, there is the potential for announcing an agreement in principle prior to the mid-term elections later this fall.

Most recently, the President announced that there would be negotiations with EU beginning on July 25.

If we can make progress with NAFTA and the EU, it will reduce a lot of the anxieties about trade wars.

More importantly, near-term success with either of these would begin to prove that the President’s strategy of applying maximum pressure in order to facilitate negotiations to lower trade barriers.

President Trump’s desired end game is exactly what he proposed at the G-7: universally lowered and reciprocal tariffs and non-tariff trade barriers.

Again, thank you for having me here with you today, and I look forward to our discussion.

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Last updated: 2018-07-19 10:19

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